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Weekend Reading for Financial Planners (Nov 7-8)

November 6, 2015 02:29 pm 26 Comments CATEGORY: Weekend Reading

Enjoy the current installment of "weekend reading for financial planners" - this week's edition kicks off with the big news that "robo" platform Financial Engines is acquired human-advisor-driven RIA The Mutual Fund Store for a whopping $560M, as Financial Engines acknowledges the growth limitations of lacking human advisors and the opportunity of having an in-person human presence with the clients advised on the firm's 401(k) platform.

From there, we have a few articles about looming regulatory reform, including predictions from Fi360's Blaine Aikin about how the Department of Labor's fiduciary proposal will unfold in the coming months (largely intact, but with a few concessions to the broker-dealer industry), a recent study from Morningstar suggesting that while the DOL's fiduciary proposal allows commissions to be paid to advisors who sign a best-interests contract with clients that in practice commissions may soon be dead, and a look at the latest warning shot from Senator Elizabeth Warren who is raising questions about the sales incentives that insurance companies pay out to annuity agents (particularly the non-cash compensation, like lavish trips for hitting big sales targets).

We also have a couple of technical articles this week, including a discussion of the U.S. Treasury's new MyRA accounts which came out of "beta" and into wide release this week, a good reminder that when crafting investment decisions based on views about the market and the economy that advisors should be wary not to make the strategies too complex, and a look at how dollar-cost-averaging is most likely to be an inferior investment strategy to just allocating a lump sum into the markets but may be appealing anyway from a risk-management perspective.

There are also a few practice management articles in this week's reading, including: tips to make your advisory firm more efficient operationally; how to develop a more standardized process for business development; and how to improve client engagement by utilizing a structured approach to crafting an agenda that is shared with each client in advance of a client meeting.

We wrap up with three interesting articles: the first is a review of the recent T3 Enterprise conference, where one of the big themes is whether all the recent FinTech merger and acquisition activity will cause even more companies to sell out and the already-acquired to lose their independent; the second is a look at a concerning new battle emerging between major banks and personal financial management dashboard Mint.com, as JP Morgan Chase and Wells Fargo recently cut off Mint's access to client bank accounts for a week in what may be a troubling "shot across the bow" to account aggregation providers; and the last is a look at how financial planning educational programs are beginning to adapt to advisory firm demands for better-trained students by incorporating courses on "softer" client communication skills and even sales and marketing classes, in addition to the usual content for technical competency.

And be certain to check out Bill Winterberg's "Bits & Bytes" video on the latest in advisor tech news at the end, including his coverage of the big news that Financial Engines has acquired The Mutual Fund Store, the T3 Enterprise conference, and two newly announced integrations - one between ShareFile and Smarsh to allow shared documents with clients to automatically be archived for compliance purposes, and the other between Quovo and Blueleaf.

Enjoy the reading!

CapGainsValet Launches Aggregated Information Source For Year-End Mutual Fund Capital Gains Distributions

November 3, 2015 07:01 am 8 Comments CATEGORY: Technology & Advisor FinTech

As we move through the fourth quarter, this is the time that fund companies start publishing their estimates for end-of-year capital gains distributions – a tax event that can have significant ramifications for investors, yet one for which its remarkably difficult to aggregate together relevant information across a wide range of investment companies.

Until now. Financial advisor (and Chief Investment Officer) Mark Wilson of The Tarbox Group has (re-)launched his Capital Gains Valet (or CapGainsValet for short) service, which pulls together all the reference links for investment company capital gains distribution estimates to a single site location. And the service is made available to advisors and other investors for free (Wilson simply asks for donations to his charity of choice).

And notably, in a year where markets have been relatively flat but many funds have significant embedded capital gains due to the past 6 years of a raging bull market, it becomes especially important to plan in advance for year-end distributions… both for those who might consider selling a recently-purchased fund with a large gain looming, or who may wish to defer buying a large-gain-distributing fund until after the end of the year. Or alternatively, at least focus on the asset location benefits of placing such gains-distributing funds (especially those with large embedded capital gains) inside of a retirement account in the first place!

How A More Regular Client Meeting Schedule Enhances Advisor Productivity And Business Growth

November 2, 2015 07:01 am 18 Comments CATEGORY: Practice Management

Social Image Impact Of Having A Schedule

The business of financial advising is a client service business, and as such the client should always come first. This is certainly true in the advice and recommendations provided to the client, and most advisors extend it even to allowing clients to schedule meetings at the times they wish.

Except as an advisory firm grows, providing clients “too much” flexibility in scheduling meetings leaves the financial advisor stuck in a purely reactive mode, with declining productivity and the inability to focus due to the disruptive switching from client meeting to financial planning work to emails to staff meetings and more. And when you’re unable to control your business, then your business will control you!

So what’s the alternative? Create a more rigorous and structured schedule for yourself and your client meetings - a "model week" - and then plan around the consistent calendar it creates. For instance, only accept client meetings on Tuesdays, Wednesdays, and Thursdays, saving Mondays to prepare for the week’s meetings and Fridays to wrap up all the necessary follow-up. And while it might feel scary to ask clients to focus meetings only on certain days, the reality is that in most cases, it would take little more than a nudge for most clients to follow along.

Ultimately by restructuring meetings, though, the advisor (and the supporting team!) can not only regain control of the business, but enhance their productivity and efficiency by reducing the constant distraction of switching from one types of task to the next. It even allows for time to schedule meetings to work on the business – a key task that is crucial for strategic business growth, but is almost impossible to do when the advisor isn’t in control of the business in the first place!

Weekend Reading for Financial Planners (Oct 31 – Nov 1)

October 30, 2015 02:01 pm 26 Comments CATEGORY: Weekend Reading

Enjoy the current installment of "weekend reading for financial planners" - this week’s edition kicks off with the huge news this week that the budget compromise in Congress will include a "crackdown" that ends the popular Social Security claiming strategies of File-and-Suspend and Restricted Application, with only a narrow period of "grandfathering" for retirees who planned to use these rules in the near future. Also in the news this week was a fresh industry benchmarking study finding that tech-savvy advisory firms are increasing their productivity lead over the rest, with the most tech-savvy firms having on average 40% more AUM and serving 55% more clients.

From there, we have a slew of practice management articles this week, including: the results from the recent FA Insight benchmarking study, finding that advisory firms who pay their employees more end out being more profitable thanks to more productive employees; a discussion of how important it is to have a rigorous hiring process to find the best employees (or outsource to a firm that can do it for you!); the importance (and difficulty) of advisors creating their own transition plan about how they will someday "gracefully" exit their advisory business; the story of how one advisory firm successfully transitioned from AUM to retainer fees; why it's important to change your sales process with prospective clients if you're not closing at least 30% of them; whether advisory firms that pay the ticket charges for trades in client portfolios are introducing untenable conflicts of interest; and the rules for most of the major brokerage/custodian firms about how they handle client losses if a clients' financial accounts are hacked.

We wrap up with three interesting articles: the first critiques some of the "convoluted logic" that brokerage firms and insurance companies have been putting forth as self-interested objections to the DOL's fiduciary proposal; the second looks at some of the "myths" that wirehouses have used to claim why they remain a superior place for their advisors to build a business, even as RIA market share grows and an increasing volume of brokers decide to break away; and the last is a great reminder about the value of establishing a "Mastermind Group" of peer advisors to help you get better ideas to improve your business, have a group to bounce your own ideas off of, and to provide a level of accountability to help ensure that you take the steps you have committed to in order to improve yourself.

Enjoy the reading!

Congress Is Killing The File-And-Suspend And Restricted Application Social Security Strategies

October 28, 2015 07:01 am 296 Comments CATEGORY: Retirement Planning

When Congress passed the Senior Citizens Freedom to Work Act in 2000, it introduced a new concept called “voluntary suspension” of benefits, allowing those who had already started Social Security benefits to stop their payments and earn delayed retirement credits. In the process, however, the new voluntary suspension rules unleashed several additional Social Security claiming strategies, including various “claim now, claim more later” tactics involved File-and-Suspend and Restricted Applications for spousal benefits.

And under this week’s budget legislation, Congress has decided to close these perceived “loopholes” in the Social Security rules. By extending the rules for deemed application, it will no longer be possible to file a restricted application for just spousal benefits. And with an extension of the “suspension” rules that stipulate suspending an individual’s benefits will also suspend any benefits to other people based on the same earnings record, Congress has killed off the various “File and Suspend” strategies to allow spousal and dependent benefits to be paid while still earning delayed retirement credits.

Perhaps most notable for the new Social Security crackdown, though, is the effective date for the rules. While the new limits to Restricted Application will not apply to anyone who is already age 62 or older in 2015, the new crackdown ~~may suspend current spousal or dependent benefits in 6 months for those who are only receiving those benefits thanks to File-and-Suspend!~~ will kick in 6 months from now (thanks to a recent amendment to the original legislation), grandfathering anyone currently going through file-and-suspend but limiting anyone who tries to suspend benefits thereafter. ~~In other words, those who already engaged in the File-and-Suspend strategy may find it terminated mid-stream,~~ Beyond that point, anyone who suspends will find that no benefits will be payable until the individual who suspended chooses to reinstate benefits (either to restart them now, or finish waiting until age 70).

Notably, the crackdown on these voluntary-suspension-related tactics doesn’t actually kill the rules for voluntary suspension itself, which remains on the books. But now, aside from a few esoteric scenarios (including the recent Hold Harmless Medicare claiming strategy), voluntary suspension will be relegated to those unique scenarios where someone truly started benefits early, has had a change of mind and wants to stop them (after a year has passed and it’s already too late to withdraw the application) to earn delayed retirement credits, with the plans of starting benefits again at age 70. Of course, ideally those who wish to delay benefits for the value of earning delayed retirement credits will simply delay from the start to maximize the benefit, which makes voluntary suspension a moot point altogether for most retirees in the future!